IRS Publication 530 — Tax Information for Homeowners
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“Keep records that support an item of income, a deduc- tion, or a credit appearing on a return until the period of limitations for the return runs out. (A period of limitations is the period of time after which no legal action can be brought.) For assessment of tax you owe, this is generally 3 years from the date you filed the return.”
To be deductible, the interest you pay must be on a loan secured by your main home or a second home, regardless of how the loan is labeled. The loan can be a first or second mortgage, a home improvement loan, a home equity loan, or a refinanced mortgage.
Caution: Interest paid on home mortgage proceeds is only deductible to the extent the loan proceeds were used to buy, build, or substantially improve your home. Prepaid interest. If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. An exception (discussed later) applies to points. Late payment charge on mortgage payment. You can deduct as home mortgage interest a late payment charge if it wasn't for a specific service in connection with your mortgage loan.
Mortgage prepayment penalty. If you pay off your home mortgage early, you may have to pay a penalty. You can deduct that penalty as home mortgage interest, provided the penalty isn't for a specific service performed or cost incurred in connection with your mortgage loan. Ground rent. In some states (such as Maryland), you may buy your home subject to a ground rent. A ground rent is an obligation you assume to pay a fixed amount per year on the property. Under this arrangement, you are leasing (rather than buying) the land on which your home is located.
Redeemable ground rents. If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. The 6 Publication 530 (2025)
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